Statue of SocratesSome time ago I read “Socrates Cafe”, by Christopher Phillips, a philosopher who sets up discussion groups which attempt to answer questions using the Socratic method. It’s not a bad little book, and Phillips and his participants do ask some good questions - and the model of Socrates is certainly one I’ve always admired. But the book got me thinking about the following question - “how do we know what we know?”

The question bothers me, and engages me, because action comes from knowledge (or should). If your knowledge is wrong - your actions will not have the consequences you expect. For me economics, especially development economics, is the paradigmatic case. It turns out that building power infrastructure isn’t the key step to development. It turns out that opening up markets isn’t always a hot idea. It turns out that tariffs do appear to work, under some circumstances. It turns out that what works for a city state is different than what works for a larger nation. It turns out moving to cash crops to generate a surplus may not be such a hot idea. It turns out that government borrowing to “invest” in the economy doesn’t usually work. In fact it turns out that almost everything development “experts” have told the developing world to do over the last fifty years - doesn’t work.

More recently and spectacularly it turns out that Iraqis weren’t going to greet US troops with flowers. It turns out that Saddam didn’t have WMD. It turns out that failing to rebuild Iraq was held against the coalition. It turns out that the number of troops sent in wasn’t sufficient.

The post-modern answer seems to be that the answer is whatever you say it is as long as you can game the system to accept your answer. This works when you’re operating in a system that everyone accepts and which has the surplus to support being wrong. You can think of it in Marxian terms as the superstructure vs. the underlying reality. If you do something that doesn’t mesh with the underlying reality - if the other game participants buy in, then in effect you’re “right”. There are consequences, and those consequences may impoverish or kill people, but you’re rewarded for gaming the system, so from your point of view, who cares? This works as long as you’re in a system with a significant surplus and margin for error. In the US, for a long time, the system was so powerful and rich, that even if your policies made no sense at all (say, Star Wars) it didn’t matter - the system could support the draw down and the supporters of Star Wars are rich, and those who opposed it - well, who cares what they think, anyway? Show me the money, baby!

Now this system of “knowledge” or “truth” breaks down under two circumstances. The first is when the surplus/power isn’t sufficient to support incompetence - to overwhelm the fact that you’re doing things stupidly. The second is when players refuse to play and your power isn’t sufficient to roll over them. If you add the two together, you’ve got a recipe for disaster. Iraq’s a situation where you’ve got both situations - the US isn’t powerful enough to just roll over the Iraqi opposition - and the Iraqis are outside of the game. Now the thing is if you’d bought up the right Iraqis - made them rich and powerful - you’d probably be powerful and have enough surplus to pull it off. And if you were just powerful enough, you wouldn’t have to buy them (though it’d still be smart).

That’s post-modernism. It’s built on the house that modernism built and modernism’s mantra is “follow the discipline”, or “follow the numbers”. You do what the numbers tell you to do. Modernism has its problems - overspecialization and managing what you can measure are two of them. Modern professionals do what their professional understanding tells them to do and if that profession is only measuring part of the problem then they may only be acting on part of the information and in doing so may do the wrong thing. So, for example, Keynesian economics deals primarily with the business cycle in a system where there are no bottlenecks you can’t substitute away from using either labor or capital. When that isn’t true, Keynesian economics doesn’t work. When the problem isn’t the business cycle per se, but deeper structural problem - Keynesian economics doesn’t quite work either.

But modernism has outside discipline - in post-modernism if you’re winning the game you’re right. You know, your truth is the truth. In modernism if the numbers don’t add up, even if you’re making money or if things seem to be ok - you’re wrong and you need to adjust. If the system is still producing a surplus, but the numbers aren’t coming out the way you predicted, as a modernist you need to know why. As a post-modernist, “whatever, it’s working.”

There’s an old saying that runs as follows, “a beautiful theory, slain by an ugly fact.” The problem is that it seems that ugly facts don’t slay beautiful theories any more. The fact is that no nation other than a city state has modernized in modern times by engaging in free trade and free currency flows. Yet it still gets prescribed, because the theory of comparative advantage is so beautiful, that no economist wants to either dump it, or make it work (and it can work, you just need to understand under what circumstances rather than trying to make it a universal law that works under all circumstances.)

This is where the second of the three tests of truth runs up on the shoals of the third (we'll visit the first test in a moment).

The second test of truth is the test of coherence. Is it internally consistent? Is it logical? That’s the test of coherence. The test of coherence is internal, a theory can be coherent -- and absolutely dead wrong. The third test of truth is the pragmatic test. Does it work? So - comparative advantage doesn’t work. Therefore, even if it’s coherent - it’s wrong. Or our understanding of it is wrong.

This is the Iraq test as well. Obviously the NeoCon/Bush understanding of the Iraq occupation and war is wrong. Why? Because it isn’t working. They’re losing. They’re wrong because it’s a clusterfuck. If they were right, they’d be winning.

Now the first test of truth is identity - if I say “the swan is black” and the swan is white, I’m full of it. But the first test of truth is the hardest one. Most things aren’t that clear cut. Sometimes they are - it’s pretty clear that Saddam didn’t have WMD’s of any significance, for example. It’s clear that Iraqis didn’t greet the coalition troops with flowers, as another example. But most of the time you’re operating in an imperfect world where you can't just say “that doesn’t match with reality.”

So, the development experts who thought that if they built power plants and power lines third world countries would industrialize -- most of them were probably operating in good faith. It’s true that first world countries have power plants and power lines. It’s true that third world countries at that time didn't have those things. It’s true that large scale industry is very difficult to engage in without those things. But it turns out it's not true that those things are sufficient for modernization. They’re necessary - but not sufficient. It also turns out that they’re perhaps premature - they’d be necessary at some point - but there are steps that have to come first.

And that moves us back to the question “how do you know what you know?” Because if you’re a development expert back in the 50’s you’ve got to fish or cut bait - you’ve got to tell people how to develop or you’ve got to say “don’t know, excuse me, I’m going back to Peoria”. So the development experts looked at the Tennesse Valley Authority and the Marshall Plan, said “hey they seem to be working” and went for it with the best of intentions - and fucked things up unimaginably badly.

And so we come back to - how do you know what you know? Sometimes it’s obvious. Before the Iraq war I was saying “there are no WMD of any significance, the war will be easy and the occupation will be hell.” So were lots of other people. The first was a question of the first and second tests of truth. Identity - there were no WMD being found. Second test, coherence, the administration was constantly being caught out in lies about WMD - the story wasn’t coherent. On the third test - well the Bushies are fuckups, so pragmatically, why would you think they knew what they were talking about?

On the occupation you’re looking at test one and two. Coherence - these people think the Iraqis, who have been under US embargo, causing hundreds of thousands of deaths, are going to greet the US with flowers? Pragmatic - well, see Bush is a fuckup on policy and see “firing the professional staff (Shinseki) when they try and tell you to use the number of troops and tactics which have worked in the past.”

Did you see that phrase “worked in the past”? Well - if something’s worked in the past, maybe you should look at it and emulate it and try and figure out why it worked in the past. Hmmmm?

So when those development experts were trying to give advice, maybe they should have looked at the only non-western country to succesfully modernize and industrialize and try and figure out what it did? Maybe they should have looked at Japan. Because the TVA was not applicable (not a country trying to modernize) and the Marshall Plan was not applicable (modern countries rebuilding, not trying to go from a non-modern to a modern state). But Japan was (at least partially) applicable - a non western country trying to go from a pre-modern to a modern economy. How’d they do it? Well they didn’t do it by building centralized power plants, by dropping tariffs, by inviting in huge factories or by selling commodities. They didn't do it by importing foreign managers either. In fact they did almost exactly nothing that the development experts were advising their clients to do. Nothing.

So you’ve got a successful model of how to develop and you’ve got a bunch of untested theories based on inapplicable models. Which should you go for? The untested models, of course. Because those models were developed by people like you, not a bunch of geeks. Because those models allow you to sell the developing countries your expertise, your goods and allow you to set up lucrative trade deals. Not only do you get to believe your own theories - you get to profit from it.

How do we know what we know when you actually need to make a decision and take action? Honestly - I don’t know. But I do know you need to ask yourself the three questions I listed above. And I do know that you need to ask yourself:

is there someone who’s done it and succeeded?

And did they actually do what I want to do and start from the same state? Did they really do it? What’s different between what I want to do and where I’m starting from than where they started from?

Am I going to do more harm than good if I’m wrong?

People often say inaction is worse than doing something. They’re wrong. Remember, in any situation you’re walking into there’s already a solution set being applied and if you mess with it, your solution set may be worse.

Now - in a crisis, sometimes you’ve got to take action - because the end state of the current trendline is unacceptable and even if you make it worse - well, dead is dead and dead in three years as opposed to five is still dead, but a chance of life has to be taken.

But in many cases - you need to ask yourself carefully, “do I really know what I think I know? Am I sure enough that I know to take action?”

Because if you don’t answer those questions reality will - and you may not like the answers…